The Jenkins Division recorded operating data as follows for the past year: For the past year,the minimum required rate of return was:
A)7%
B)8%
C)16%
D)14%

Question

The Jenkins Division recorded operating data as follows for the past year:  For the past year,the minimum required rate of return was:
A)7% 
B)8% 
C)16% 
D)14%

Quizplus · Accepted Answer

Residual income = Net operating income - (Average operating assets × Minimum required rate of return)
$14,000 = $30,000 - ($200,000 × Minimum required rate of return)
$200,000 × Minimum required rate of return = $30,000 - $14,000
$200,000 × Minimum required rate of return = $16,000
Minimum required rate of return = $16,000 ÷ $200,000 = 8%

The Jenkins Division Recorded Operating Data as Follows for the Past